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Hi tutor,
i came across this in the study guide:
Discuss the practical considerations in valuation of shares including:
-marketability and liquidity
– availability and sources of information
– market imperfections and pricing anomalies
– MARKET CAPITALIZATIONHow does market capitalization affect share prices?
And how do you think ACCA would ask a question surrounding the above points, including behavioral finance (in your opinion)?
Im thinking questions on valuation but I’ve never seen behavioral finance or pricing anomalies being discussed in any of the past year questions nor questions in the revision kit or mock exam papers.
Hope to hear from you, thanks 🙂Market capitalisation is simply the total market value of all the shares and so is not directly relevant.
However it does give the size of the company, and a very big company is likely to be perceived as being less risky that a small company, which can in turn have an affect on share prices.
The examiner is unlikely to test on any of those points specifically, but he could ask generally about the problems relating to share values and expect you to mention these points in your answer.
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